Healthcare Town Hall

Arkansas has proposed using Medicaid expansion dollars to provide subsidies so that eligible individuals can purchase health insurance through the exchange. The U.S. Department of Health and Human Services has indicated that it will consider approving such proposals.

The Arkansas proposal has various financial implications, especially with regard to provider reimbursement levels and various aspects of the Patient Protection and Affordable Care Act (ACA), including the minimum medical loss ratio requirement and the “3Rs” (reinsurance, risk corridors, and risk adjustment). This healthcare reform briefing paper by Rob Damler, “Considerations for Medicaid expansion through health insurance exchange coverage,” examines these key considerations for a state contemplating this approach.

Medicaid Arkansas, HHS, Medicaid, Medicaid expansion, Minimum loss ratios, Rob Damler

Health Plan Week looks at the future of Medicaid managed care plans as states wrestle with the question of whether to expand their Medicaid programs. Here’s an excerpt:

This is the type of interest you’re seeing from Medicaid health plans, whether you’re in a big state like Ohio, or the smallest of states,” [Mlliman's Rob] Damler says, adding that mounting competition in the Medicaid space will push carriers to make their bids as compelling as possible by ensuring they have “a strong provider network, strong quality measures, experienced staff, good contracting.” But more aggressive bidding from larger, well-capitalized carriers could make it difficult for smaller carriers to compete, he adds.

However, a growing interest in quality measures could give some small, local carriers an advantage over much larger entitites. In their RFPs, some states are increasing the amount they will withhold from carriers that don’t hit quality measures, says Damler. While states historically might have withheld one-quarter to one-half percent of their capitation rate, more recent contracts have boosted that percentage to between 1% and 3%, he says.

Medicaid Medicaid expansion, Rob Damler

Managed Healthcare Executive digs into the kinds of nuanced mistakes that can complicate risk-sharing efforts. Here is an excerpt:

Experts agree that the 1990s’ capitation agreements were not adjusted for the risk of the population, leaving some winners and some losers in risk sharing without any correlation to how well providers did their job. Typically, payers counted on controlling costs by contracting with provider organizations in capitation models.

Today, they need better ways to identify variance in the underlying morbidity of the populations they serve or they might not be getting an accurate picture of the capitated population and its risk proposition.

Robert M. Damler, principal and consulting actuary for Milliman, says failing to adjust for age and intensity in the capitation model, and simply using an average of the total population and calculating a value at the beginning of the year, could have a significant impact on risk sharing. While most experts agree that no risk-adjustment methodology is perfect, the process could become a key to driving the payer’s bottom line.

“Some groups look profitable, but when you adjust for the underlying morbidity, they may actually be creating an issue,” Damler says.

 For more perspective on how this time it may be different, check out this paper.

Electronic Health Records provider risk sharing, Rob Damler

The Patient Protection and Affordable Care Act (PPACA) provides for an expansion of Medicaid eligibility for individuals who have an annual household income at or below 138% (including the 5% income exclusion) of the federal poverty level (FPL). Recent discussion has turned to individuals who may qualify for Medicaid even though their households have significant Social Security or Supplemental Security Income (SSI).

Using the 2009 American Community Survey (ACS) data published by the U.S. Census Bureau, this paper explores the potential number of individuals receiving Social Security or SSI and other family members within the household who may have been excluded from the Medicaid population expansion analyses because of the differences between defining household income under the public surveys and the modified adjusted gross income (MAGI). The MAGI methodology will be used to determine eligibility for Medicaid and exchange subsidies under the PPACA.

State-by-state results are provided in the appendices to this paper.

UPDATE: Here’s the Managed Care Online story on the analysis.

Reform Medicaid expansion, Paul Houchens, Rob Damler, Social Security

The state of Indiana has posted a number of issue briefs written by Milliman consultants. The issue briefs concern Indiana’s state exchange and health reform in general. The full library is available here. Of particular interest:

• Comparison of Insurer/Plan Selection Approaches
• Offering Exchange Benefit Plans Outside the Exchange
• Health Plan Quality Monitoring
• ACA Impact on Premium Rates in the Individual and Small Group Markets
• Individual and Small Group Premium Changes Under the ACA
• 2019 Health Insurance Enrollment Projection for Indiana
• Merging the Individual and Small Group Markets

Reform Andrew Naugle, Jill Herbold, Patty Jones, Paul Houchens, Raymond Pryor, Rob Damler, state exchanges

Looking for a good example of how very small, relatively off-the-radar provisions of the health reform law can have big implications? Here’s what the American Medical Association has to say today about Medicaid expansion cost estimates in Indiana:

Indiana’s estimated spending under the health system reform law will be $333 million lower than an earlier estimate by the same consultant.

Indianapolis, Ind.-based Milliman Inc. had calculated in a May 21 report that Indiana would spend at least $2.9 billion to implement the law between 2014 and 2020. But a follow-up Milliman report released Oct. 18 reduced that estimate by about $333 million due to a revised Centers for Medicare & Medicaid Services interpretation of the health reform law (www.in.gov/aca/files/AffordableCareActFinancialAnalysisUpdateOct2010.pdf).

Federal law requires manufacturers to provide rebates to states and the federal government for certain drugs. CMS indicated in April that the health reform law increased the federal share of these rebates to include certain existing state rebates, but CMS in September clarified that the federal government would not take any existing Medicaid state rebates, said Marcus J. Barlow, spokesman for the Indiana Family and Social Services Administration. This reduced Indiana’s cost under health reform.

The devil is in the details, and many details are still in flux.

Cost, Reform Indiana, Medicaid, Rob Damler

There have been many questions about how recent Milliman analysis of Nebraska’s Medicaid budget exposure compares to similar Kaiser Family Foundation (KFF)/Urban Institute analysis. Both analyses consider the effect that the Patient Protection and Affordable Care Act (PPACA) will have on Medicaid enrollment. While the two reports have different bottom line estimates (all assumptions are laid out in Milliman’s Nebraska report), they have similar adult and parent enrollment figures. This exhibit illustrates the adult and parent enrollment comparisons:

As you can see, the enrollment figures have overlapping ranges, though they do have some key differences. The KFF/Urban Institute reported values are for coverage in 2019, while the Milliman reported values were from the 2009 Current Population Survey.  The differential between the two time periods may account for 5% to 10%.  Further, Milliman estimates reflect the enrollment up to 138% of the federal poverty level (FPL); however, the Kaiser estimates reflect enrollment only up to 133% of the FPL. 

The biggest difference between Milliman’s enrollment estimates and other published estimates is the inclusion of children in the Milliman analysis. The KFF/Urban Institute analysis does not include children. Here is a breakdown of how the child enrollment estimates compare:

Research published this month by the Urban Institute in Health Affairs indicates nationwide Medicaid enrollment figures of more than 80% for children. The only state with an individual mandate already in place, Massachusetts, has child enrollment of 95%. Once enrolled in Medicaid, children will have different cost dynamics than adults, which is due to certain federal match rate specifications in PPACA.

The differences in the two reports are the result of different assumptions.

Medicaid, Reform Medicaid, Rob Damler

A new analysis looks at the cost of Medicaid expansion in the state of Nebraska and, as might be expected, the numbers are being interpreted a number of different ways. National Public Radio/Kaiser Health News has the story. The unique characteristics of Medicaid in Nebraska are another reminder of the diversity in healthcare costs from one state to another.

This report looks only at Medicaid, which is how it arrives at the cost of between $526 million and $766 million for the state. The cost of uncompensated care has been held up as justification for the state to foot these kinds of costs.

As is so often the case anytime we talk about the cost of care, in addition to considering the specifics it can be helpful to step back and look at the underlying factors driving the healthcare cost trend.

Cost, Medicaid Medicaid expansion, Nebraska, Rob Damler

A new article in Modern Healthcare looks at the Healthy Indiana Plan, a Medicaid expansion program that has yielded some interesting results. Here’s an excerpt from the Modern Healthcare piece:

While the jury is still out on how well the health savings account and preventive-care incentive are working, analysts have looked at utilization trends among the newly insured and found that those signing up for the program are sicker and more frequent users of healthcare than those enrolled in commercial, employer-sponsored health plans.

The Healthy Indiana Plan “population used more care than the typical commercial population in Indiana with the same age and gender characteristics,” says Rob Damler, principal at Milliman, a consulting and actuarial firm. Damler is the consulting actuary to the state of Indiana on the health plan.

Childless adults enrolled in Healthy Indiana, for instance, had nearly three times as many inpatient services as private plan members in the first year. And pharmacy use was nearly 50% higher than a typical commercially insured population.

This newly enrolled group was also sicker than the general population. Their relative morbidity was 65% greater than their peers covered by private health insurance. The earliest enrollees to the program also proved to be the sickest, with the highest healthcare costs, Damler says.

This phenomenon is called anti-selection, where the least healthy population seeks healthcare coverage available to them, driving up the costs to insurers and the population covered.

The Healthy Indiana Plan offers some considerations for national reform, Damler says. “One of the issues that needs to be understood is pent-up demand,” he says. “We need to be prepared that the newly insured may cost more in the first 12 to 24 months than the insured population.”

Not surprisingly, insurance companies say that without a federal law requiring everyone to carry health insurance, national healthcare reform won’t work because the chronically ill will sign up for coverage in large numbers, driving up costs, while the healthy will stay on the sidelines.

“It only works if everyone’s covered,” says Alissa Fox, senior vice president of policy at the Blue Cross and Blue Shield Association.

Medicaid, Uninsured, Universal coverage, Utilization Indiana, Rob Damler

The Healthy Indiana Plan (HIP) is a Medicaid expansion program that offers perspective on the cost and utilization patterns of the uninsured as they enroll for coverage and access care. What follows is an analysis of the experience data from this program.  

Illustrating cost patterns during initial period of enrollment

The HIP populations also followed a particular pattern of utilization during the initial enrollment period. Figures 7 and 8 show measurements of inpatient, outpatient, pharmacy, and physician expenditures relative to average PMPM costs, first for caretakers and then for non-caretakers (for explanation of these populations, see the full paper). The 100% line measures the average PMPM for the first year of coverage for the population represented.

Figure 7: Caretakers

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Medicaid, Reform, Uninsured, Utilization Indiana, Medicaid expansion, Rob Damler